Landlord Licensing: A Solution to Toronto’s Tenant Woes?

Supporters say landlord licensing would create more accountability for tenants, but critics argue the regulation would be unwieldy and costly.

By Mark Mann

Photo by ashtonpal from the Torontoist Flickr Pool.

There’s a reason the civil service regulates the private sector: they’re supposed to keep the public from getting screwed over.

At least, that’s the idea. And, for better or worse, we need the help. Sometimes it’s difficult to tell the difference between a legitimate and illegitimate trade professional, and that makes it easy to pay good money for a bad job. If we had to check everyone’s qualifications ourselves, we’d never have time to do anything, so we rely on government services and checks and balances to filter out the quacks and cons.

In Toronto, the Municipal Licensing and Standards office protects us from fake plumbers, bad barbers, and non-certified auctioneers. It shields us from crappy portraiture by unlicensed artists on the boardwalk and low-quality street performers. You can’t open a bakery, pawn shop, or café without getting approval first. Add to that list bowling alleys, laundromats, salvage yards, billiard halls, massage parlours, parking lots, and circuses.

But there is one lucrative business for which you don’t need a license: being a landlord. If you want to get into the housing market and assume responsibility for the living conditions of other human beings, all you need is the money to buy the property. Critics say that’s not good enough.

Some people in Toronto think the lack of landlord licensing is strange, particularly those who live in apartment buildings where landlords aren’t willing to pay the money it takes to ensure living conditions are kept to a decent standard.

“Tenants can’t choose to pay less than 100 per cent of their rent. Landlords shouldn’t be able to choose to not give 100 per cent of the service they’re supposed to give,” says Geordie Dent, the executive director of the Federation of Metro Tenants’ Associations.

“Unfortunately, one of those things happens pretty often and one of them doesn’t,” he adds.

The Limits in Landlord Accountability

Since the City initiated its Multi-Residential Apartment Building (MRAB) audit program in 2009, inspectors have identified 51,898 deficiencies in the buildings they’ve investigated. The problems are grouped into categories, and for all those deficiencies, 4,174 notices or work orders were issued. Of those, 727 have yet to be dealt with, including 30 that date back to 2009. It’s safe to say that there are quite a few people who would be interested in a better way to regulate landlords.

Photo by Fion N from the Torontoist Flickr pool

Despite the apparent need for better enforcement of property standards, there’s at least one straightforward reason Toronto doesn’t license landlords: it would cost a lot of money. Creating the administrative and legal framework for a new regulatory regime—not to mention implementing it—would be a huge undertaking. Technically, the landlords would have to fund it through licensing fees, but the first thing any of them will tell you is that those fees would be passed on to the tenants through increased rents.

Opponents of landlord licensing like to refer to it as a tenant tax. But Dent says that this has no basis in reality. “Landlords don’t raise and charge rents in accordance with their costs, but in accordance with what the market will bear,” he says. “The recent massive run-up in rents has nothing to do with landlord costs shooting up. They haven’t shot up. Landlord’s property taxes have been going down.”

Everything you Ever Wanted to Know About Property Taxes

Don’t rent controls protect tenants from the kind of exorbitant rent increases that Toronto has seen? Not really. Rent controls do restrict the amount a landlord can raise the rent year to year, but the system of vacancy decontrol—whereby landlords are free to increase the rent however much they want if the tenant vacates the apartment—means that, when given the chance, landlords are going to push rents even higher than they otherwise would.

Vacancy decontrol not only raises the cost of housing, it also encourages landlords to look for ways to evict tenants. “Some landlords just let the property run down, and then they say they have to do major repairs, so that people have to leave,” says Councillor Ana Bailão (Ward 18, Davenport), the chair of the Affordable Housing Committee. “How do we ensure that people aren’t forced to leave their apartments?”

The Toronto Property Standards Bylaw (PDF) is meant to protect tenants from bad landlords, but it’s not strong enough, says Councillor Janet Davis (Ward 31, Beaches-East York).

Torontoist Explains: Tenant Rights

“Under the City of Toronto Act, we have very limited taxation powers,” Davis explains. “So anything that we would charge over and above the actual cost of enforcement would be considered a tax, and we can’t do that.”

If you’re a tenant and don’t pay your rent, you’ll be evicted. But if you’re a landlord and don’t do maintenance, you’ll pay a modest re-inspection fee. Those fees are so negligible that some landlords simply consider them the cost of doing business.

The worst consequence for landlords—the strongest enforcement tool the City currently has—is that the City will simply do the repairs and charge landlords on their property taxes. The odds of resorting to this tool are slight. Since the MRAB program began, the City has only taken remedial action on landlords 10 times.

“The landlord’s obligation is to provide housing that’s fit for habitation and to comply with all those municipal bylaws,” says Kenneth Hale, the director of advocacy and legal services at Advocacy Centre for Tenants Ontario. Those obligations are all written down in a lot of detail. The Residential Tenancies Act provides a mechanism for tenants to come to the landlord and request their rent be reduced if these things aren’t being met.

“It all looks pretty good, but the reality is that it’s not working all that well,” says Hale. “There are a lot of those situations where the tenant is not able to enforce those rights. The general balance of power between tenants and landlords makes it quite unusual for tenants to actually want to take legal action.”

Instead of relying on the existing system, Davis suggests a package of economic levers that will force landlords to offer decent housing. For example, she thinks that if landlords fail to comply with work orders, the City should have the power to stop them from taking new tenants. In theory, this would give them the incentive to adequately care for the tenants they currently house.

Hale agrees the City should have stronger powers to deal with negligent landlords.
“If the landlord’s been ordered by the City or the Landlord Tenant Board to make repairs and they’re not doing it, why should they have access to the Landlord Tenant Board at all?” he asks. “Why should they be able to evict somebody or collect rent arrears when they don’t have any respect for the process themselves?”

Photo by Stephanie Fysh from the Torontoist Flickr pool.

Tenants have never had it too good. Homeowners have protections that date back to the Magna Carta, but until a few decades ago, renters had almost none at all. “A landlord could come in, change the lock on the front door, remove the tenant’s possessions, and that was it,” says John Miron, a professor in the department of human geography at the University of Toronto. It wasn’t until the 1970s that the laws started to change to offer more security to renters.

Rent regulation gave tenants more security for tenure, but it also curtailed landlord profits, and ultimately that has contributed to the current affordable-housing shortage in Toronto. Since rent controls came into place, developers have almost entirely ceased building apartment buildings. They build condos instead, which is a much better investment. As the gap between the rich and the poor widens, the housing market in Toronto is likely going to continue to prefer homeowners to renters, although there are signs that might change.

Like it or not, renting out apartments should offer a good return, or landlords won’t do it, and they’re an integral part of the housing picture in any major city.

At an announcement with the Affordable Housing Committee on April 27, Bailão and Mayor John Tory promised more red carpet and less red tape for any developer willing to build affordable housing in Toronto. The proposals offer a more collaborative relationship between the City and developers.

Mapping Toronto’s Tenant Complaints

But devising a market that works well for landlords and still protects tenants is a delicate balance. After all, housing is a basic human right. When businesses fail, companies lose money, and industries change accordingly (unless, of course, the government bails them out). But when housing markets fail, people suffer in a way that we cannot tolerate as a civil society.

In his 1997 paper The Economics of Rental Housing Supply and Rent Decontrol in Ontario [PDF], urban and community studies professor David Hulchanski wrote, “The ‘demand’ for rental housing is not an effective market demand. It is social need. There can be and will be no supply response from the private sector under these conditions. The market does not respond to social need.”

Photo by David Michael Lamb from the Torontoist Flickr pool.

But the government isn’t always great at responding to social need, either; one of the most criticized landlords in Toronto is the City itself. Toronto Community Housing provides homes for 58,000 low- and moderate-income households, and the backlog of repairs is large, growing, and lacks adequate funding. “What kind of message does it send to the private sector when the buildings that the taxpayer owns are falling apart and unliveable?” asks Hale.

Bailão, who sits on the board of Toronto Community Housing, acknowledges the poor quality of social housing is a serious issue. When Mike Harris decided that the province would no longer be responsible for social housing, over two thousand apartment buildings were downloaded to Toronto, without any capital reserve fund to go with them. Private landlords may set aside money for major repairs, but these buildings came near the end of their useful life without the money to pay for the imminent structural repairs, which is why the maintenance has been so bad.

The city has committed over $900 million to repairs at Toronto Community Housing. But that doesn’t help the more than 90,000 households on the waiting list, many of whom are spending most of their income on housing. “We need to invest on both fronts. We can’t just turn to one group of people and ignore everybody else,” says Bailão.

Larry Smith, an economist (and landlord) who opposes rent controls entirely, offers an alternative solution to landlord licensing: give people the money they need. “If people can’t afford housing, don’t impose controls that distort a market. Instead, give them general income supplements that will let them afford adequate housing,” he says. “It’s a much more efficient way to solve the same problem.”

Bailão and Davis suggest a more immediate and attainable solution: give tenants more information on landlords, so they can do their own screening before they move into an apartment. Even though the number of deficiencies and infractions are available on the MLS website, the information isn’t easily accessible. Landlords already have a tenant registry that they use to vet potential renters; the argument goes that the City should at least give tenants the same tool.

“I think there should be much more transparency in public knowledge about a building’s history and status in terms of property standards,” says Davis. “We should have something like a restaurant-rating system, and the website should be much more accessible.”

MLS is presenting a report on the question of landlord licensing in June, but whatever they suggest, the problem of landlord negligence demands real change. “Not a lot of people care about whether it’s licensing or something else,” says Dent.

“They just want to stop this mass suffering.”